Kaletsky, a British journalist, considers the financial crisis of 2007–8 to be a turning point in the evolution of capitalism, the fourth stage since 1776. In contrast to much recent pessimism about the future of market-oriented capitalism, he believes that its pragmatic, adaptive characteristics will see it through to a robust future, despite the admittedly formidable challenges the world economy now faces. In the end, Kaletsky predicts, it will dominate the “Beijing model” that now finds admirers around the world. The fourth stage will reject the market fundamentalism that has dominated official, financial, and academic thinking and will acknowledge that a vigorous economic and financial system depends on a symbiotic and pragmatic relationship between government and private agents. Because of fiscal exigencies, Kaletsky argues, government in the future must be smaller in many respects. He faults U.S. Treasury Secretary Henry Paulson for turning a financial problem into a true financial crisis and near catastrophe by misunderstanding the nature of the problem and by unnecessarily wiping out the shareholders (including recent foreign investors) of Fannie Mae and Freddie Mac, thus decisively closing one route out of the predicament. And he is rightly scathing about the role of mark-to-market accounting in such a dynamically unstable period as 2008.
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